Lower NII and Fee Income to Hurt PNC Financial's Q1 Earnings

The PNC Financial Services Group, Inc. PNC is scheduled to report first-quarter 2025 earnings on April 15, before market open. Its revenues and earnings are expected to have improved on a year-over-year basis.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.In the fourth quarter, PNC’s earnings beat the Zacks Consensus Estimate, driven by higher revenues and a fall in provision for credit losses and expenses. However, a lower loan balance was an undermining factor.The company has an impressive earnings surprise history. It surpassed estimates in each of the trailing four quarters, with the average earnings surprise being 9.77%. The PNC Financial Services Group, Inc Price and EPS Surprise The PNC Financial Services Group, Inc price-eps-surprise | The PNC Financial Services Group, Inc QuoteFactors to Impact PNC Financial’s Q1 PerformanceNet Interest Income (NII): In the first quarter, the Federal Reserve kept interest rates unchanged at 4.25-4.5% after cutting those by 100 basis points last year. The relatively lower rates are likely to have led to the stabilization of funding/deposit costs. Also, the yield curve steepened during the quarter. This is expected to have supported PNC’s net interest margin (NIM) and NII to some extent.Nonetheless, the lending scenario was not very impressive as Trump’s tariff plan resulted in uncertainty across the markets. Per the Federal Reserve’s latest data, demand for commercial and industrial loans, real estate loans and consumer loans in the first two months of the quarter was decent. As a result, PNC Financial’s lending activity is expected to have seen some improvement.The company expects average loans to decline 1% sequentially. Further, NII is anticipated to decrease 2-3% from the $3.5 billion in the fourth quarter of 2024.The Zacks Consensus Estimate for NII of $3.45 billion indicates a sequential fall of 2.1%. Our estimate for the metric is the same as the consensus number.Non-Interest Revenues: Mortgage rates in the first quarter remained range-bound and hovered near the 7% mark. This is likely to have led to some improvement in mortgage originations and refinancing. Thus, PNC’s mortgage revenues are likely to have witnessed growth. The Zacks Consensus Estimate for the residential and commercial mortgage revenues is pegged at $132.6 million, indicating a rise of 8.7% sequentially. Our estimate for the metric is $137.3 million.Further, the quarter witnessed heightened market volatility and client activity because of uncertainty related to Trump’s tariff plans. Also, the performance of the equity markets was subdued. Hence, PNC Financial’s asset management and brokerage income is likely to have recorded a modest rise. The consensus estimate for the metric is pegged at $374.7 million, which is relatively stable sequentially. We project asset management and brokerage income to be $370.2 million.However, headwinds related to tariff plans hurt global mergers and acquisitions (M&As) as the markets witnessed extreme volatility because of the ambiguity of its implications on the economy and the Fed’s monetary policy. As such, deal value and volume were decent. Thus, the consensus estimate for the company’s capital markets and advisory income of $308.5 million indicates an 11.4% decline. We project the metric to be $326.3 million.Further, the Zacks Consensus Estimate for card and cash management revenues is pinned at $690.7 million, indicating a slight sequential decline. Also, the consensus estimate for lending and deposit services stands at $324.5 million, suggesting a fall of 1.7%. Our estimates for card and cash management revenues and lending and deposit services are $701.5 million and $324.1 million, respectively.Management expects fee income to be stable sequentially.The Zacks Consensus Estimate for non-interest income is pegged at $2.02 billion, indicating a 1.1% decline from the last quarter. Our estimate for the metric is pegged at $2.04 billion.Expenses: PNC’s expenses are expected to have continued flaring up during the first quarter due to its investments in franchise expansion, technology and digitalization, which might have hindered its bottom-line growth.Management expects adjusted non-interest expenses to decrease 2-3% from $3.5 billion in the fourth quarter of 2024. Our estimate for non-interest income is pegged at $3.43 billion.Asset Quality: PNC Financial is likely to have set aside a substantial amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of higher for longer interest rate backdrop and tariff-related uncertainty. We expect provisions for credit losses to be $249.9 million, indicating a sequential jump of 60.2%.Management expects net charge-offs to be around $300 million, up from $250 million in the fourth quarter of 2024.  The Zacks Consensus Estimate for non-performing assets (NPAs) is pegged at $2.38 billion, indicating an increase of 1.1% from the previous quarter. Also, the consensus estimate for non-performing loans (NPLs) is pinned at $2.36 billion, suggesting a rise of 1.5%. Our estimates for NPAs and NPLs are $2.34 billion and $2.3 billion, respectively.What Our Model Unveils for PNCOur proven model doesn’t predict an earnings beat for PNC Financial this time. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That's not the case here.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Earnings ESP: PNC Financial has an Earnings ESP of -0.33%.Zacks Rank: The company currently carries a Zacks Rank of 3.PNC Financial’s Q1 Earnings and Sales ExpectationsThe Zacks Consensus Estimate for first-quarter earnings has moved marginally lower in the past seven days at $3.40. This suggests a year-over-year rise of 1.2%.The consensus estimate for quarterly revenues of $5.48 billion indicates a 6.5% increase.Management projects total revenues to decline 1-2% from $5.6 billion in the fourth quarter of 2024.PNC’s Peer Stocks to ConsiderHere are some of PNC Financial’s peer stocks that you may want to consider, as our model shows that these have the right combination of elements to post earnings beat this time around.The Earnings ESP for U.S. Bancorp USB is +0.94% and it carries a Zacks Rank #3 at present. The company is slated to report first-quarter 2025 results on April 16.Over the past seven days, the Zacks Consensus Estimate for U.S. Bancorp’s quarterly earnings has been revised 2.1% upward to 99 cents.First Horizon FHN is also scheduled to announce quarterly numbers on April 16. The company carries a Zacks Rank #3 at present and has an Earnings ESP of +3.80%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Quarterly earnings estimates for First Horizon have remained unchanged at 40 cents over the past week.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report U.S. Bancorp (USB): Free Stock Analysis Report First Horizon Corporation (FHN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks